Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income taxes:

An allocation of federal and state income taxes between current and deferred portions is presented below:

	Three Months Ended March 31,
	2022		2021
Current	$	—	$	5,949
Deferred	9,313		9,639
Total	$	9,313	$	15,588

The following table presents a reconciliation of federal income taxes at the statutory federal rate of 21% to the Company's effective tax rates for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022				2021
Federal taxes calculated at statutory rate	$	9,355	21.0	%	$	14,377	21.0	%
Increase (decrease) resulting from:
State taxes, net of federal benefit	951		2.1	%	1,750		2.6	%
(Benefit) expense from equity based compensation	(291)		(0.7)	%	(221)		(0.3)	%
Municipal interest income, net of interest    disallowance	(444)		(1.0)	%	(424)		(0.6)	%
Bank-owned life insurance	(74)		(0.2)	%	(84)		(0.1)	%
Section 162(m) limitation	122		0.3	%	227		0.3	%
Other	(306)		(0.6)	%	(37)		(0.1)	%
Income tax expense, as reported	$	9,313	20.9	%	$	15,588	22.8	%

The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation paid to certain individuals. It is the Company’s policy to apply the Section 162(m) limitations to stock-based compensation first and then followed by cash compensation. As a result of the vesting of these units and cash compensation paid to date, the Company has disallowed a portion of its compensation paid to the applicable individuals.

The components of the net deferred tax (liabilities) assets at March 31, 2022 and December 31, 2021, are as follows: 

	March 31,		December 31,
	2022		2021
Deferred tax assets:
Allowance for credit losses	$	34,146	$	35,233
Operating lease liabilities	12,251		12,478
Net operating loss	3,644		1,370
Amortization of core deposit intangibles	53		—
Deferred compensation	2,243		5,484
Unrealized loss on debt securities	26,158		—
Unrealized loss on cash flow hedges	—		205
Other assets	7,684		8,301
Subtotal	86,179		63,071
Deferred tax liabilities:
FHLB stock dividends	$	(484)	$	(484)
Operating leases - right of use assets	(11,111)		(11,287)
Depreciation	(7,930)		(7,938)
Amortization of core deposit intangibles	—		(116)
Unrealized gain on equity securities	(2,167)		(2,407)
Unrealized gain on cash flow hedges	(68)		—
Unrealized gain on debt securities	—		(1,324)
Mortgage servicing rights	(37,696)		(30,098)
Goodwill	(14,276)		(13,743)
Other liabilities	(2,699)		(2,494)
Subtotal	(76,431)		(69,891)
Net deferred tax assets (liabilities)	$	9,748	$	(6,820)

The Company had a net operating loss carryforward generated as a result of a previous acquisition amounting to $6,523 as of both March 31, 2022 and December 31, 2021. The net operating loss carryforward can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, the Company believes the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward expires on December 31, 2029.

During the three months ended March 31, 2022, the Company generated a federal net operating loss carryforward of $6,602 and state net operating loss carryforward of $17,560. While the federal loss has no expiration period and the state loss may have varying expiration periods, the Company expects to generate sufficient taxable income to utilize the loss generated.